Volcker: U.S. Should Have Fewer Financial Regulatory Agencies

Former Federal Reserve Chairman Paul Volcker said the U.S. doesn’t need six financial regulatory agencies and the current system has overlaps and loopholes that play into the hands of lobbyists.

Speaking at a luncheon before the Economic Club of New York, which gave him a leadership excellence award, Volcker said only two or three agencies were needed. He said he thought the Fed should be one of those, and one overseeing depositary institutions would also be necessary.

Volcker, who lends his name to an as-yet unfinished regulation restricting banks’ trading and investing activities, expressed impatience with the pace of progress on post-crisis financial reform.

The so-called Volcker Rule has been stalled as banks push back against stricter language.

The delays are being exacerbated as multiple overlapping financial regulatory agencies all try to figure out their role in the new regulatory environment. “The simple fact is the United States doesn’t need six financial regulatory agencies,” Volcker said in his speech. “It is a recipe for indecision, neglect and stalemate, adding up to ineffectiveness. The time has come for change.”

Federal offices overseeing financial regulation include the Fed, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the Securities and Exchange Commission, and the Consumer Financial Protection Bureau.

Volcker served as an economic adviser to President Barack Obama through the financial crisis. He was chairman of the Federal Reserve from 1979 to 1987.

Earlier Wednesday, Volcker announced he has formed a new group called the Volcker Alliance that aims to restore public trust in government by improving how government works. The group will work with universities and private think tanks to fund research on government performance and then make recommendations on how governments can put policies into action.

“We will endeavor to rekindle intellectual, practical, and academic interest in the implementation of policy–the nuts and bolts of governance,” he said in a statement.

Shelley Metzenbaum is the founding president of the Volcker Alliance. She was most recently associate director for performance and personnel management at the White House Office of Management and Budget. Other members of the alliance include Alice Rivlin, a former Fed vice chairman and director of the Office of Management and Budget during the Clinton administration, and Bill Donaldson, a former chairman of the Securities and Exchange Commission.

Update: The Office of Thrift Supervision ceased to exist in 2011 as a result of the Dodd-Frank Act. An earlier version of this post incorrectly listed it as one of the agency overseeing financial regulation.